Sen. Teddy Kennedy (D.-Mass.) is looking to the New Deal for inspiration as he designs the liberal policy response to Hurricane Katrina. He wants to create a federal reconstruction agency modeled on the Tennessee Valley Authority to oversee and finance the reconstruction effort.

Kennedy's proposed agency, the Gulf Coast Regional Redevelopment Authority, would be led by an official with cabinet rank and would be empowered to hire thousands of construction workers, engineers and government planners to handle the actual reconstruction. Not surprisingly, all workers would be entitled to union wages and enjoy full union protections.

Reviving LBJ's Great Society

Other congressional liberals such as Rep. Maxine Waters (D.-Calif.) see former President Lyndon Johnson's Great Society as the repository of all wisdom. Waters wants to infuse the troubled and scandal-prone Community Development Block Grant program with hefty amounts of cash.

Meanwhile, Sen. Blanche Lincoln (D.-Ark.) has proposed a breathtaking expansion of both Medicare and the runaway Medicaid program that provides health services and long-term care to the poor. She wants the federal government to be the sole source of health coverage for every resident affected by Katrina, regardless of their income or where they now live. The affected states-including neighboring states such as her own state of Arkansas and Texas-would be responsible for adding Katrina's victims to the rolls, but Uncle Sam would pay all the costs.

Congressional Republicans have been designing their own Katrina recovery legislation. Conservatives at the Heritage Foundation and elsewhere have advocated that any recovery package begin with the understanding that the liberal social welfare programs of the last century failed the poor in every imaginable way and must be thoroughly overhauled. Moreover, the unique circumstances created by Katrina-where the social and economic infrastructure of an entire vast region will need to be reconstituted all at once-have given lawmakers the unprecedented opportunity to offer the poor in the Gulf States a comprehensive set of solutions that could improve virtually everything government does.

Lawmakers including Sen. Jon Kyl (R.-Ariz.), who chairs the influential Republican Policy Committee, and the usual hardy band of conservative activists in the House who serve on the Republican Study Committee share that view and have been compiling thoughtful policy responses.

Education reform may emerge as one key battleground. Liberal calls to spend billions to rebuild the school systems in New Orleans and elsewhere in the Gulf exactly as they were pre-Katrina will be countered, one hopes, with efforts to create voucher-like alternatives using federal money. Recall that in 1999, when the Children's Scholarship Fund mounted a national campaign to extend 40,000 opportunity scholarships to children in low-income families, low-income families in New Orleans rejoiced and sought the scholarships in record numbers. One in four eligible children applied-29,000 in all-for a mere 1,500 scholarships. Three-quarters of New Orleans' eighth graders can't read and nearly two-thirds lack adequate math skills.

Likewise, refundable tax credits to enable dislocated workers to purchase private health plans, coupled with reforms to Medicaid to give eligible individuals the opportunity to use Medicaid dollars to purchase private health coverage, are also under discussion and may become part of any comprehensive plan.

Of course, should Republican lawmakers opt to pump tens of billions of dollars into the same old failed programs, they should be prepared for harsh political repercussions.

Trial Lawyers Take Advantage

Millions of dislocated residents and businesses in Louisiana, Mississippi and Alabama have been grappling with floods, disease, homelessness and unemployment. To all these challenges, add the onslaught of class-action lawsuits and other legal shenanigans from the trial bar.

Why focus on this seemingly distant threat? According to a well-respected survey, the three states Katrina devastated rank among the absolute worst in terms of their legal climates for business.

The U.S. Chamber Institute for Legal Reform conducts an annual survey of some 1,400 senior corporate executives to determine "how reasonable and fair the tort liability system is perceived to be by U.S. businesses." Perceptions here are reality, because the overwhelming majority (81%) of these executives say, "The litigation environment in a state could affect important business decisions," including "where to locate or do business."

The executives were nearly unanimous in their assessment that the legal climate in these Gulf States punishes business investment and stifles job creation. Permissive rules governing class action lawsuits and punitive damages, serious concerns over the impartiality and competence of judges, and the fairness and predictability of juries all contribute to this hostile climate.

To limit their exposure to the rapacious trial bar and improve the prospects for a full economic recovery, leaders in Louisiana and Alabama will have to reform their tort systems. States that scored high on the Chamber's list such as Delaware, Nebraska, Virginia, Iowa and Indiana should serve as examples. Happily, Mississippi Gov. Haley Barbour (R.) successfully pushed a package of reforms through his state legislature last year, which should mitigate any trial lawyer-inflicted harm there.

Mike Franc, who has held a number of positions on Capitol Hill, is vice president of Government Relations at The Heritage Foundation.